EROI

Key Points

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Notes from The IEA WEO 2008 from the Perspective of Biophysical Economics

  • IEA report predicts 106 mbpd of oil production by the year 2030, growth of demand for oil at 1.6 percent per year indefinitely
  • World Energy Outlook (WEO)
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  • IEA reports that ultimate recoverable reserves from conventional sources total 3.5 trillion barrels, and from unconventional sources upwards of 6.5 trillion barrels.
  • This report, and economics more generally, completely lacks the understanding that those numbers are not only quite unproven but irrelevant and useless by themselves, for the important number is not “how many barrels are in the ground” but “how many of those barrels will be gained at a significant energy profit for society.” In effect, the notional figure of 106 mbpd gives the impression that oils net benefit to society will continue and even grow into the future.
  • Oil requires resources to produce, and will only be produced relative to the resources spent in obtaining it.
  • Geological factors are overriding economic factors: Size of fields is diminishing and quality of petroleum is falling (higher sulfur content, heavier oils, oils obtained from tar sands or shale)
  • As time progresses an increasing proportion of global oil supplies will have to come from fewer supergiant and giant fields within OPEC, as efforts to expand production worldwide has failed to keep pace with the depletion of non-OPEC fields
  • Old OPEC “elephants” are seriously aging and require more and more energy to maintain pressure through injection of, for example, seawater into the lower parts of these fields
  • The combination of quantity and quality reductions has led to decreasing Energy Return on Investment (EROI) which has not in any way been compensated for by technology or increased drilling rates
  • EROEI is a rough estimate of upstream costs: exploration, development, and production of new wells
  • EROEI reported by country:
    • Saudi Arabia ~$55/bbl
    • Russia, rest of OPEC $70-90/bbl
    • Iran and Venezuela $90/bbl
  • Energy used by oil and gas industries is about 17 MegaJoules (MJ) per dollar spent in 2006
  • Assume conservatively 16 MJ/$ and energy content of 1 bbl = 6164 MJ:
    • Saudi Arabia: $55/bbl x 16 MJ/$ = 880 MJ/bbl, EROEI = 7
    • Russia: $70/bbl x 16 MJ/$ = 1120 MJ/bbl, EROEI = 5.5
    • Iran and Venezuela: $90/bbl x 16 MJ/$ = 1440 MJ/bbl, EROEI = 4.3
  • U.S. EROEI in 1930's was 100:1 but only 10:1 by 2000. New technology is not improving EROEI, and economic theory cannot overcome basic physics
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The Net Hubbert Curve: What Does It Mean?

  • Declining EROI means that the net energy contained in each unit of energy delivered to society is decreasing over time
  • Requiring the extraction of increasingly greater quantities just to meet societal demand
  • Decreases the quantity of energy remaining in the ground for future society
  • Makes it more difficult to find and develop the remaining bit of energy.
  • What is the Minimum EROI that a Sustainable Society Must Have?
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